Cost of Solar Panels

The cost of solar panels is about $15,000 - $25,000 depending on the size of your solar system. For a 7.5 kW system, the cost would be about $21,000. The cost of your solar panels (including other hardware and installation) is based on an average cost per watt of $2.80. Naturally, the cost is one of the major factors that homeowners consider when they think of going solar. One of the great things about solar energy is that the fuel cost is essentially zero. Nada. Zip. However, you still have to pay for the solar panels and other hardware, along with the cost of installing them on your property. Here are the top three facts to know about the cost of solar panel installations.

Cost of Solar Panels Breakdown

The cost of solar panels for your home is determined by two major cost categories: hardware and "soft costs".

The hardware category includes solar panels (also called modules), inverters, racking systems, and other electrical and structural components (lovingly called "balance-of-system" or BOS hardware). The cost of solar hardware has decreased significantly in the last few years, and today, hardware costs account for about 32% of the total installation cost.

The second major cost component, the so-called "soft costs", includes labor, contractor profits, contractor overhead, permits and customer acquisition costs. All of these items add up to about 68% of the installation cost.

Fact #1: The average cost of solar panels (including all hardware and 'soft costs') in the U.S. is $2.80 per watt (2017 data).

Cost of Solar Panels Breakdown

Itemized List

Item Cost per watt Legend
Profit $0.34
Overhead $0.31
Customer acquisition (Sales & Marketing) $0.34
Permitting, Inspection, Interconnection $0.10
Installation labor $0.30
Sales tax on equipment $0.09
Supply chain cost $0.42
Electrical BOS $0.24
Structural BOS $0.11
Inverter $0.19
Module $0.35
Total $2.80
Data Source: National Renewable Energy Laboratory, U.S. Solar Photovoltaic System Cost Benchmark: Q1 2017 Benchmark

Evolution of Residential Solar PV System Costs (2009-2017)

Since 2009, the cost of solar panels has decreased by a whopping 60%. Combined with the 30% federal tax credit, this reduction in overall installation costs has been a major catalyst for the growth of the solar industry.

Intense competition and economies of scale in the solar hardware market led to plummeting prices for solar panels followed by large reductions in inverter prices and, more recently, in racking system prices. However, after years of steady decline, costs are now leveling off.

The next challenge in cost reduction is decreasing the share of "soft costs". However, cost items such as labor, profit and overhead tend to be much more "sticky" than hardware costs. Although further consolidation in the industry may bring further reductions in this category, the rate of decrease is likely to be less dramatic.

Fact #2: In the last few years, we haven't seen the dramatic price drops that we saw earlier in the decade. If you're playing the waiting game with the expectation of further cost reductions, you may be losing out on significant savings today.

Period Cost per watt
Q4 2009 $6.96
Q4 2010 $6.1
Q4 2011 $4.31
Q4 2012 $3.77
Q4 2013 $3.31
Q1 2015 $3.09
Q1 2017 $2.80
Data Source: National Renewable Energy Laboratory, U.S. Solar Photovoltaic System Cost Benchmark: Q1 2017 Benchmark

Understanding the Comparative Cost of Solar Panels

Although cost per watt is a handy indicator for understanding the cost of solar panels, it should be used together with another cost metric: levelized cost.

Levelized cost takes into account the location of the installation as well as the expected lifetime of the solar panels. It is generally expressed in dollars (or cents) per kWh. This is a very useful metric, as it allows us to compare the cost of solar to the status quo - your current utility rate. When the levelized cost is the same or less than the utility rate, we have "grid parity". All of these factors are important in answering the question are solar panels worth it?

We prepared these handy maps for you to compare the levelized cost of solar to your utility in your state or province.

Fact #3: Ultimately what really matters is how much solar power costs compared to your utility. See how your state or province compares by clicking on the map below.

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United States

Cost of residential solar power is less than the average utility rate in all U.S. states after the federal tax credit. Learn more.

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A number of provinces are offering solar incentives, making solar panels in Canada more attractive. Learn more.

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Plenty of sun, and high residential electricity prices make solar an ideal choice in all Australian states. Learn more.

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Written by Simone

Simone Garneau is the co-founder of Sunmetrix, an online consumer education website for residential solar energy. The goal of Sunmetrix is to help homeowners go solar and save money. In addition to 200+ articles about solar energy, Sunmetrix offers homeowners other great resources: a Solar Report for solar energy, Discover, to preview solar energy for your home, and Learn for fun and interactive solar tools.
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Sunmetrix is a Canadian winner of the business innovation contest organized by the U.S. Department of Energy

Your website is excellent. It provides great information and advice.

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